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The Collection Plan: Taking Control of Your Accounts Receivable
You’ve completed your service for the client and sent out the bill. But the money is not yet in your hands. You could just sit and wait (and hope), but we suggest a better alternative: a collection plan. A comprehensive plan will make collections more successful by informing clients of their obligations and identifying bad debts early enough to take appropriate action.
Formulating an effective collection plan is the first and most important step in getting control of your accounts. By setting up a comprehensive scheme for dealing with accounts receivable collections, you can obtain your money faster and avoid the necessity of going to an outside collection agency or attorney.
In constructing a collection plan it is important to strike a balance between effective collections and not angering (and losing) clients. At the same time it is necessary to quickly identify those clients who will not pay, so that more drastic actions are initiated.
In order for a collection plan to be effective it must treat all accounts according to the same policy so that your staff and clients know their obligations. This consistency will can be best achieved through the creation of a “schedule”, similar to the one show below, which sets out the various contacts that should be made with the debtor at appropriate intervals. When designing a schedule you need to keep diplomacy in mind as well as your financial needs. A bookkeeper can call a client to check on an account a certain amount of time after a bill has been sent. If this is done incorrectly it can be very rude and will be likely to antagonize your clients, but if it is done properly it can be both polite and effective.
The schedule show below is only an example; you will have to design your own plan to suit your particular business needs.
At some point it will become apparent that any further efforts to convince a client to disgorge the unpaid funds would be futile. The whole point of a collection plan is to determine who is not going to pay, and to determine it as quickly as possible. Our own feeling is that any account which is over 90 days past due should be considered a bad debt and sent to an attorney for collection.
Accounts Receivable: A Plan to Improve Your Collections
Effective management of accounts receivable requires a written procedures manual, so that the patients, the office staff and the doctors understand everyone’s duties and responsibilities. This plan will increase in-house collections.
A comprehensive collection plan that informs your patients of their obligations and identifies bad debts early can go a long way toward putting you in control of your accounts-getting your money more quickly and minimizing the cases sent to an attorney or collection agency. Any such plan that you devise must strike a balance between a policy that is too harsh at the cost of strained relations, or a lost patient, and one that is too permissive at the cost of profitability. Even the best plan will prove futile in some cases, when it becomes apparent that any further effort to convince a patient to pay will fall on deaf ears. Identifying bad debts and quickly sending them out for collection will improve your success rate.
This sample outlines a mix of written and oral reminders. Perhaps one like it will work for you.
|Past Due||Contact Type|
|15 days||Pleasant memo: “Do you need more information?” — written|
|30 days||Polite inquiry: “Just a reminder.” — oral|
|45 days||Strong reminder: “Is there a problem?” — written/oral|
|60 days||Strong demand: “Please pay now!” — written/oral|
|75 days||Final demand: “Pay now or face legal action.” — written/oral/personal visit|
|90 days||Place debt with collection agency or attorney|